Beirut becoming less affordable for expats

GMT
23:52 2012
Thursday ,14
June

Beirut - Arabstoday

In a new list of the most expensive cities for expatriates, Lebanon’s capital has outstripped Abu Dhabi as one of the least affordable metropolises in the Middle East region.
According to global consultant and investment adviser Mercer, in a report issued this week, Beirut has overtaken Abu Dhabi as an expensive expat city, while Jeddah, Saudi Arabia, still ranks as the least expensive city in the region.
“On the whole, most Middle Eastern cities have dropped in the ranking, mainly because price increases on goods and services have been more moderate here than in our benchmark city, New York. Slight decreases in expatriate accommodation costs were also observed in Abu Dhabi and Dubai,” said Nathalie Constantin-Métral, principal at Mercer.
Beirut is now the 67th most expensive city for expats in the world, up eight places. Abu Dhabi is at 76th, down nine places.
For American University of Beirut economist Jad Chaaban, Beirut’s combination of high-cost housing, food and energy render living in the city very expensive compared to the rest of the Middle East.
“The most important factor is the cost of housing. There is a very limited supply of rentable apartments in Beirut. Those available are big and very expensive apartments that target wealthy individuals,” he said.
“Expats demand small apartments that are between 60 and 80 square meters. Even when such an apartment is available, it would rarely cost less than $1,000 a month,” Chaaban added.
He pointed out that speculation on the real estate market contributes to inflating the cost of housing for expats and locals alike.
In addition to housing, he said the cost of food in Beirut is strikingly high compared to other areas in Lebanon, set aside other cities in the region. “The cost of groceries, for instance, is up to three times higher than any area outside the capital,” he highlighted.
Adding to living costs, Chaaban highlighted, is inflated energy cost.
In addition to individuals and businesses having to hire private generators to cover for electricity rationing, Lebanon’s obsolete public transportation renders the use of private cars necessary. “Given the high cost of gasoline and traffic jams, transportation is also a major expense,” he added.
M. P., a longtime American expat who asked that his full name not be used, echoed many of the AUB economist’s analyses.
“It’s the lack of renovated, affordable, middle-class housing. Lebanon’s cost of living is ruined by rent prices; Apartments in Beirut continue to rise in rent as Lebanese owners renovate or build only five-star-style luxury apartments. Or on the lower level, they’re renting apartments that haven’t seen any renovation since before the Civil War. As a result, you can pay $400 a month or $1,500 plus a month but there’s almost nothing in between,” he said.
Journalist and author Claude Salhani said that “inflation in Beirut is getting out of hand with prices sky-rocketing. Add to that the tourism scare brought about by Gulf Arabs advising their citizens not to remain in Lebanon – where visitors from the oil-rich states like to spend their summers and a few billion dollars on everything from renting luxurious apartments on Beirut’s waterfront, to fancy cars, restaurants, clubs and hotels – which will further impact the economy in a negative manner.”
He added with some invective: “Now top it off with the U.N. declaring the violence in Syria officially ‘a civil war’ and more tourists are likely to stay away.”
Mercer’s annual Cost of Living survey reported that Tokyo was the world’s most expensive city for expatriates, pushing Luanda, Angola, down to second position, with Osaka coming in as the world’s third most expensive city, up three places from last year.
Moscow remains in fourth place and Geneva in fifth. The Mercer report said Zurich and Singapore share sixth place, up one and two places respectively since 2011. Ndjamena, Chad, drops five places, but Hong Kong retains its ninth place.
Constantin-Métral, who is responsible for compiling the ranking each year, said: “Deploying expatriate employees is becoming an increasingly important aspect of multinational companies’ business strategy, including expansion. But with volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential, including on expatriate remuneration packages.”
“Making sure salaries adequately reflect the difference in cost of living to the employee’s home country is important in order to attract and retain the right talent where companies need them.”
Constantin-Métral said the annual survey covers 214 cities across five continents and measures the comparative cost of over 200 items in each location, including transport, food, clothing, household goods and entertainment.
Often the cost of housing is the biggest expense for expatriates; it plays an important part in determining where cities are ranked, in the survey. New York is used as the benchmark city and all cities are compared against it. Currency movements are measured against the U.S. dollar.
According to the report Karachi is ranked as the world’s least expensive city for expatriates (214th), less than one-third as expensive as Tokyo.
The Cost of Living survey reported that recent world events, including economic and political upheavals, have affected the rankings for many regions through currency fluctuations, inflation and volatility in accommodation prices.
By The Daily Star